Atlanta Home Prices Show Signs of Bottoming

I’ve wanted to share some good news about the Atlanta housing market for a long time. A long time. It just hasn’t been in the cards.

On the contrary, Atlanta has often been depicted as the negative end of the home-price spectrum. If Phoenix represented the pinnacle of market strength among metro-sized housing markets, Atlanta was down at the base.

Full disclosure. I’ve been guilty of this kind of assessment myself, as in this quote from an article last month: “Consider the difference between Phoenix, which has a one-year home price change of 6.1%, and Atlanta, which has a one-year change of -17.6%. Steady appreciation on the one hand, and serious depreciation on the other.”

We’ve had to wait years for a glimmer of light out of the Atlanta housing market. But finally we have it. The latest data from the Case-Shiller/S&P Home Price Index, released earlier today, show 2.3% appreciation in Atlanta home prices from March to April of 2012.

The word is appreciation, as in rising values. We’ve seen the word “depreciation” in the same sentence with Atlanta for a long time. So I thought I’d point out the distinction, lest it go unnoticed. Indeed, home prices in the metro area rose by 2.3% from March to April.

Actually, data over the last few months have suggested Atlanta’s housing market might be in the process of bottoming. For instance, the February-to-March numbers showed a smaller level of depreciation (-0.9%), compared to previous months. These latest numbers give even more credence to the notion that a long-troubled real estate market is finally turning around.

Granted, there’s a lag time in the data reported by Case-Shiller. So we don’t yet know what has transpired from April to May. But the data we do have seem to suggest a market that is “bouncing along the bottom,” as the expression goes.

Home Prices Rise: An End to the Slump?

Here is the 20-city composite from the Case-Shiller/S&P Home Price Index. It shows home-pricing trends for the last couple of months, and also for the last year (right column).

The March-to-April column of this chart shows the good news for Atlanta’s real estate market. But take a look at the column on the far right side. It shows how home prices have changed over the last 12 months (from April 2011 to April 2012 in this case). You can see that prices in Atlanta have fallen the furthest over the last year or so, compared to other cities in the metropolitan index.

Job Growth Puts (a few) More Buyers Into the Market

Atlanta’s employment picture has gradually improved over the last 12 months. As shown by the chart below, the metro area has added nearly 28,000 jobs between May 2011 and May 2012.

Notice the roller-coaster nature of this chart. Just when it seems the city is on a steady upward trend with jobs, the employment rate drops again. This happened again in May 2012, when the metro area’s unemployment rate rose from 8.5% to 8.6%. Still, we must look at the big picture. This time last year, the jobless rate was 9.5%. A continued upward trend in employment will put more buyers into the market, reducing inventory and pushing home prices north. And speaking of inventory…

Housing Inventory is the Real Story Here

Housing inventory plays a critical role in all of this. When the market first began to crumble in 2008, it boosted inventory levels across the nation. Atlanta was not spared. For a long time, the metro area had a glut of homes on the market, and not enough buyers to absorb them. It was a case of lopsided supply and demand that sent home prices south.

Over the last couple of years, however, the inventory situation has greatly improved. According to Metrostudy, a real estate data and consulting firm, housing supply in the Atlanta area has fallen an incredible 83% since 2006. This is largely what drove the recent uptick in home prices. If the job market improves, the supply-and-demand picture could shift even more, bringing a bottom to the local housing market. Finally.

This city still has a long way to go, just to reach something resembling normalcy. But it sure is nice to see a light at the end of the tunnel.